About Keith Vance

TA Montpelier Reporter

Keith Vance is the Montpelier reporter for the Barre-Montpelier Times Argus. He's worked as a journalist in far-flung places like Seattle and Cambodia, but has found a home in "Montpeculiar", as locals call the nation's smallest capital city. You can follow him on Twitter @KeithMontpVT

03/19/2012

City Hall working "furiously" on the district energy project

MONTPELIER — The district energy project will continue to dominate City Hall this week.

In his weekly report, City Manager William Fraser said he and his staff are working “furiously” to get the business component of the project up and running.

In addition to heating municipal buildings, the city is hoping to sell thermal energy to downtown building owners.

Last year when voters authorized the city to bond up to $2.75 million to fund the district energy project, any district energy customers who wanted to tap into the system were considered gravy.

The project was expected to be financially viable heating five city buildings — city hall, police and fire stations, and elementary school and the high school.

But last week the city council told Fraser to go after non-city district energy customers to shore up a $930,000 budget shortfall.

Dropping the high school from the system, Fraser said will trim approximately $500,000 from that $930,000.

To come up with the approximately $420,000 to make the project financially sustainable, Fraser is looking for other building owners to commit to plugging into the system.

But to get commitments from building owners located along the distribution system path, the city needs a business plan and a product proposal to present to potential customers.

Director of Planning and Community Development Gwendolyn Hallsmith sent the city council a draft business plan ahead of the March 14 meeting.

Hallsmith projected gross sales revenue out to 2018 for the nonprofit organization that would be created to run the thermal energy municipal utility.

According to Hallsmith’s estimation, if the city signs up 10 specific non-city customers to the system, and plug in Union Elementary School, gross sales would be nearly $360,000 a year in fiscal year 2015.

That list of prospective customers includes Vermont Mutual, Union Mutual, the Washington County Sheriff’s office and the federal building where the U.S. Post Office is located on State Street.

Factoring in direct cost of sales of $222,691 leaves a gross margin of $136,382. According to Hallsmith, $84,110 would go toward paying interest on the bonds, leaving about $52,000 net profit.

That’s if all potential customers become customers.

On Friday, Fraser said letters were sent to prospective district energy customers inviting them to a March 29 meeting to learn more about hooking up their building.

“We are in the heating business,” the business plan says. “Our competition are the individual oil, gas, and wood boilers that buildings owners own.”

Fraser said that the terms of a deal to present to prospectie district energy customers is still under development.